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China calls for greater domestic gas production
The central government is once more calling on its energy majors to produce more of the cleaner-burning fuel at home in an effort to rein in a deepening reliance on imports
COMMENTARY
WHAT:
The NEA has called for greater upstream efforts with a focus on unconventional gas.
WHY:
The county has long held ambitious production targets for shale gas.
WHAT NEXT:
Developers are likely to struggle in meeting Beijing’s desired production levels.
THE Chinese government has released a new report calling for a ramp-up in nat- ural gas output in order to boost national energy security.
While production of the fuel almost doubled over the last decade to reach 161bn cubic metres in 2018, consumption exploded by roughly 250% to 280 bcm. is drove a nearly twenty- fold rise in the country’s imports, with purchases climbing to 125 bcm last year.
e National Energy Administration (NEA), in a report published on August 31, has called on the country’s developers to ramp up produc- tion from the Sichuan and Ordos Basins as well as o shore China. With domestic gas consump- tion predicted to rise by around 10% to 310 bcm this year, the administration also wants to a see a greater focus on developing the Sichuan Basin’s unconventional resources.
e NEA said: “ rough expanding devel- opment of deep-reservoir gas, tight gas and shale gas, Sichuan is likely to account for about a third of the country’s total natural gas output [by 2050].”
e basin is understood to account for 20% of the country’s gas production at present. e NEA added that the basin’s shale gas produc- tion could eventually overtake its conven- tional gas output.
e government has made overly ambitious projections about its shale gas industry in the past, however, and these latest forecasts are likely of the same ilk.
Shale troubles
e central government originally predicted that shale gas output could reach 60-100 bcm per year by 2020, before having to revise this down to 30 bcm. That target too is almost certainly going to be missed, given the tech- nological and geological challenges the state majors responsible for the country’s shale gas development must overcome. China produced just 11 bcm of shale gas in 2018.
While one researcher at China’s Academy of Engineering, Zhao Wenzhi, believes that shale gas production could reach 280 bcm by 2035, this is as long as more than 500 wells are drilled each year until 2035. is is double the level seen in 2018.
He called on the central government to con- sider o ering tax sweeteners such as waiving resource tax on the shale gas to facilitate that growth. e government has already pledged to extend subsidies for unconventional gas produc- tion, including tight gas, by three years.
The director of the Energy Economics Institute at Xiamen University, Lin Boqiang,
325 300 275 250 225 200 175 150 125 100
75 50 25
0
2009 2010
2011 2012
Production
2013 2014 2015 Consumption Imports
2019F
Data: NDRC, NBS, CNPC
China's natural gas balance
™
2016 2017 2018
Source: BP
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w w w . N E W S B A S E . c o m Week 35 04•September•2019
bcm per year